Chancellor Kwasi Kwarteng has cancelled the planned increase in Corporation Tax set to take effect in April for the UK’s most profitable companies and will hold rates at the existing 19% level.
The move will cut tax revenue by more than £67.5bn over the next five years, according to estimates released by HM Treasury alongside the announcement.
It will reduce the tax collected by HM Treasury by £2.27bn in this financial year which then soars to £12.4bn less in 2023/24, £16.6bn in 2024/25, £17.6bn in 2025/26 and £18.7bn in 2026/27.
Kwarteng (pictured) revealed the change to Parliament as part of the Conservative government’s mini budget.
Under the plans announced by then Conservative chancellor Rishi Sunak in March 2021, the rate of Corporation Tax was to increase from 19% to 25% from April 2023 for firms making more than £250,000 profit.
This applied to around 10% of actively trading companies.
Companies making between £50,000 and £250,000 would also face a rise in Corporation Tax, with the rate increasing incrementally from 19% to 25% depending on profit level.
For the remaining 70% of actively trading companies which make profits of £50,000 or less, Corporation Tax was to remain at 19%.
The government has now cancelled this planned increase. Rather than rising to 25% from April 2023, the rate will remain at 19% for all firms, regardless of the amount of profit made.